Back to top

Will Clorox's Growth Plans Help it Survive Forex Woes?

Read MoreHide Full Article

The Clorox Company (CLX - Free Report) has been riding on the back of its solid brand portfolio, unique expansion plans, efficient capital allocation and an impressive earnings history. Shares of the company have jumped 7.7% year-to-date.

Clorox emerged stronger in fiscal 2015 as its fourth-quarter top and bottom-line results improved year over year and exceeded expectations. Also, the company’s positive surprise history exhibits the progress of its core strategies that has enabled it to deliver strong sales, better productivity and improved margins.

Management’s optimism about achieving growth via cost-saving plan and efficient pricing also instill confidence in the company’s future prospects.

Further, Clorox has a diversified brand portfolio. The company’s focus on brand management has enabled it to further develop each of its brands, through rigorous research and development, marketing strategies, financial control and operating leverage. Given the strength of many of its brands coupled with opportunities in distribution, we believe the company is poised for significant long-term growth.

Apart from this, Clorox has a unique strategy of expanding its global footprint. While its competitors are investing in the rapidly emerging markets of Brazil, Russia, India and China, Clorox has decided to tap the opportunities available in the Middle East and other booming Asian economies. We believe that with healthy population size and rising incomes, these countries offer huge growth potential.

However, Clorox’s significant international presence exposes it to major foreign currency risks (especially in Argentina), which adversely affected the company’s results in the fourth quarter. Though the company is confident of its core business strategies, it expects adverse currency fluctuations and sluggish global economies to weigh on its fiscal 2016 performance.

We also remain somewhat cautious about this Zacks Rank #3 (Hold) company’s performance, given the persistently slowing economic condition in some of its key global regions, resulting from macroeconomic hurdles like high inflation and sluggish GDP growth. Also, high manufacturing and logistics costs remain a concern. Further, the company expects to incur high trade promotion spending in fiscal 2016. All these factors are likely to weigh on Clorox’s financial results.

Hence, as the company’s optimism seems somewhat interrupted by the negative factors, we would prefer to wait and see what Clorox has in store for its investors.

Key Picks from the Sector

A couple of better-ranked stocks in the same industry are Reckitt Benckiser Group plc (RBGLY - Free Report) and Swisher Hygiene Inc. . Both stocks carry a Zacks Rank #2 (Buy). A better-ranked stock is the broader retail sector is Constellation Brands Inc. (STZ - Free Report) , holding a Zacks Rank #2.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
 


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


The Clorox Company (CLX) - free report >>

Constellation Brands Inc (STZ) - free report >>

Reckitt Benckiser Group PLC (RBGLY) - free report >>